Westpac Institutional Bank Morning Report
New Zealand dollar
NZD continues to drift higher. The NZD quietly rallied yesterday, and with little directional bias from offshore or from equity markets, found inspiration when the Reserve Bank said it would accept bank paper to ease liquidity constraints as a result of the recent credit squeeze. A late afternoon sell-off in the PY also supported the bullish NZD sentiment. The currency continued its recent pattern of range trading overnight and opens today solidly around 0.7150 as we await Merchandise Trade data today, and further details of the Fonterra payout.
AUD returns to favour. Risk appetite appears to have returned to the AUD as stop loss orders around 0.8080 gave way yesterday to see the currency trade through 0.8100. The move higher was partly led by NZD strength, however the AUD is now also comfortably trading above its 200-day moving average of 0.8130. Further gains were made overnight with the AUD now passing hands above 0.8200.
Risk appetite returns. Increased risk appetite and a firmer equity markets boosted higher yielding currencies during yesterdayâ€™s trade. The Bank of Japan left Japanese interest rates on hold and US banks borrowed funds in the Federal Reserveâ€™s discount window to add liquidity. Sterling therefore benefited, trading from an intraday low of 1.9919 to post an overnight high of 2.0094. Conversely, the yen was sold to finance the return to â€ścarryâ€ť currencies and JPY strengthened from an early low of 115.30 to peak at 117.15, before slipping back to 116.00. The euro also advanced, strengthening from 1.3535 to an intraday high of 1.3588.
Economic data and events
US initial jobless claims fell 2k to 322k, not as strong as expected, in the week ending 18 Aug. Jobless claims in August are averaging higher than July, but similar to June.
Bank of Japan on hold on 8-1 vote. Mizuno dissented in favour of a hike. This outcome was widely expected given the ongoing global market instability. Our view prior to the turmoil was that September was the most likely timing for the move to 0.75%. That is currently under review. One thing we are sure of: the staff are hawkish.
Ger Q2 final GDP was unrevised at 0.3%qtr. The breakdown revealed a 0.6% bounce-back in consumption from its -1.8% fall in Q1, but construction investment was weak, and a stocks correction knocked -0.6% off quarterly growth. Net exports were positive.
UK Q2 business investment increased 0.8%, while the market was expecting 2%+. Non-manufacturing investment rose, but construction investment fell a surprising -12.8%, on top of on a near -9% fall in Q1.
Date Country Release Last Forecast
24 Aug NZ Jul Merchandise Trade NZDmn -525 -775
US Jul Durable Goods Orders 1.3% 2.0%
Jul New Home Sales -6.6% -2.0%
Jpn Jul Corp. Services Prices %yr 1.4% 1.6%
Eur Aug PMI Manufacturing Adv 54.9 54.5
27 Aug US Jul Existing Home Sales -3.8% -0.9%
UK Summer Bank Holiday
28 Aug US Aug Consumer Confidence 112.6 105.0
Minutes of 7 Aug FOMC Meeting
Latest Research Papers/Publications
â€˘ NZ Interest Rate Focus (22 August)
â€˘ NZ Weekly Forex Outlook (20 August)
â€˘ When greed turns to fear (17 August)
â€˘ NZ Q2 Retail Sales Review (14 August)
â€˘ NZ Weekly Forex Outlook (14 August)
â€˘ NZ Q2 HLFS Review (9 August)
â€˘ NZ Q2 LCI and QES Review (6 August)
These papers/publications are available on Online Research on
Westpac Institutional Bankâ€™s website (www.wib.westpac.co.nz)
< <i>Westpac Banking Corporation ABN 33 007 457 141 incorporated in Australia (NZ division). Information current as at 24 May 2005. All customers please note that this information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs. Australian customers can obtain Westpac's financial services guide by calling +612 9284 8372, visiting www.westpac.com.au or visiting any Westpac Branch. The information may contain material provided directly by third parties, and while such material is published with permission, Westpac accepts no responsibility for the accuracy or completeness of any such material. Except where contrary to law, Westpac intends by this notice to exclude liability for the information. The information is subject to change without notice and Westpac is under no obligation to update the information or correct any inaccuracy which may become apparent at a later date. Westpac Banking Corporation is regulated for the conduct of investment business in the United Kingdom by the Financial Services Authority. Â© 2004 Westpac Banking Corporation. Past performance is not a reliable indicator of future performance. The forecasts given in this document are predictive in character. Whilst every effort has been taken to ensure that the assumptions on which the forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from these forecasts.</i>